A recent change has been confirmed by the government that will see the statutory legacy, the amount which a surviving spouse or civil partner receives where a person dies intestate (without a valid Will) and leaves children, significantly increased. As of 26th July 2023, the statutory legacy will increase to £322,000 from its former level of £270,000. The rise of £52,000 has been brought in ahead of the planned review of the statutory legacy in 2025 due to high levels of inflation.
The change has brought the topics of Statutory Legacy and intestacy into the spotlight. Here we take a closer look…
What is the statutory legacy?
Statutory legacy is designed to ensure that certain people close to the deceased are provided for financially even if the testator has made no provision for them – ie. has not made a will or does not have a valid will.
Intestacy occurs when a person dies without leaving a valid will. When this happens, the law decides how the person’s estate (assets and money) will be divided. This means that the deceased person’s wishes may not be taken into account.
The established order of intestacy gives priority to a surviving Spouse and any other direct descendants. Following this, the order of intestacy refers to parents, siblings, grandparents and aunts/uncles.
If you die intestate, and you are survived by a spouse or civil partner and by your child or children, the Statutory Legacy will take effect. Where the statutory legacy is paid to the surviving spouse, the remainder of an estate is then divided equally; 50% to the spouse and 50% to children. If any children are under 18, their inheritance will be held in trust. The spouse also received the personal possessions.
Whilst the increase to statutory legacy is a welcome rise, it should be noted that in many cases, the rules of intestacy often result in a far from ideal situation. The intestacy provisions provide for close family, but this might not be in the way you want.
Many people assume that dying intestate means your property is shared out equally amongst your immediate family. However, this is clearly not the case and the Statutory Legacy has a significant effect on how an estate’s value is distributed between a spouse/civil partner and children.
This can be particularly problematic where there are children from previous marriages, or where a couple are not married or in a civil partnership. Furthermore, the rules do not take into account other parties such as step-children, close friends, or charities.
Relying on the Intestacy Rules also overlooks many of the benefits which making a Will can bring. For example, depending on the value of the estate, inheritance tax may still be due. Without a will in place, there is little opportunity to plan for any potential inheritance tax liability, therefore risking a potential 40% tax charge on the value of an estate over the nil rate band (currently £325,000).
Additionally, without a will, the division of an estate could easily be left open to legal challenge from those that feel they have a moral or financial claim on an estate.
At O’Donnell Solicitors, we assist people in making wills and planning their inheritance arrangements. Our team are highly experienced and are able to offer sensitive, yet practical advice that is tailored to meet your requirements.
Please contact Jill Waddington today to discuss making a will, or any other aspect of planning your future.